Are You the Financially 'Out Spouse'? This Quick Quiz Will Tell
A new client asked me recently, "Am I the out spouse?" She's going through a divorce, and her attorney had called her that in passing. She was a little embarrassed to ask what it meant, but she knew it didn't sound like a compliment.
I explained that the term "out spouse" is often used by divorce attorneys to describe the spouse who hasn't been managing the legal, tax and financial matters, or working with the attorneys, accountants or financial advisers. It's meant to be a description; but it is often viewed as a criticism.
In most marriages, there is a division of labor around tasks like grocery shopping, handling the kids' schedules, yard work and repairs. While it wouldn't be practical or efficient for both spouses to share all of the financial duties, excluding one –- even unwittingly -– can create a world of financial hurt for the spouse who's left out.
Many out spouses quickly get up to speed on managing their finances after separating. But some don't. In my experience as a divorce financial planner, it is during this financial gap that a great deal of damage -– often permanent -– can be done to their finances. I've seen an uninformed out spouse verbally agree to a divorce agreement that was based on inaccurate information and wildly unfair. (Fortunately, we got more information and were able to reach a more equitable settlement). In the aftermath of divorces, I've seen divorcees lose their homes because of financial mismanagement, and even get fired from their jobs because of poor performance stemming from the financial pressure.
Becoming Financially Empowered
The sooner you know if you are the out spouse, the sooner you can get comfortable with your finances and protect yourself. Even if you are not married yet, becoming more financially empowered will better prepare you for tackling your finances if you do get married. Can you answer these questions?
What bank account do you and your spouse use to pay the bills? We're starting off gently. This should be an easy one.
What are your sources of debt and how much do you owe? You should have a good idea of where your red ink is.
Have you talked to your financial adviser, CPA or family attorney within the last year? This doesn't have to be in person. Email or phone counts too.
Approximately how much were you able to save last year? A rough estimate is sufficient.
Do you know if you have an estate plan, such as a will or living trust? If you're not sure, you don't get credit for this.
How much money does your spouse make a year? If you don't know exactly, do you know where to look to find out? (And no, asking your spouse doesn't count.)
What is your net worth? If you answered with "What does 'net worth' mean?," I think it's safe to say you don't get credit for answering this question.
Have you and your spouse reviewed your investments or taxes together in the past year? A conversation about buying Powerball tickets does not count.
Do you have a personal umbrella liability policy? If you don't know, you don't get credit, but I'll give you partial credit if you at least know where to look to see if you have this coverage.
If tomorrow you had to take over all of the tax, legal and financial responsibilities, would you be confident you could handle it after a brief learning curve? Only a resounding "Yes!" counts.
How did you do? If you scored less than five, you need to get more involved. The objective is not to turn you into a financial guru or for you to take over managing your finances, but instead to get to the point where you are more aware of your financial situation.
%VIRTUAL-article-sponsoredlinks%Knowledge is key, according to family law attorney Kerri Strunk. She says, "An 'out spouse' can begin the process of becoming an 'in spouse' by knowing his/her rights under their state Law. Most so-called 'out spouses' are not aware that, during marriage and after separation, their spouse owes them many of the same duties corporate business partners owe each other under corporate law. In California, these duties include the right to access business books and records, truthful accounting as to the finances of the business, sharing of benefits and profits and full disclosure of material facts and information."
The goal of this column was to help you uncover your financial blind spots. In an upcoming column, I'll lay out what you need to do to get in financial control so you will never again be called an "out spouse."
Robert is a national expert on sudden wealth. His wealth management firm has developed a unique process for handling the financial -- and often psychological -- issues of sudden wealth from inheritance, lottery, divorce, stock options, lawsuits, and sports/entertainment contracts. Connect with Robert on Twitter @rpagliarini or Google+.